Tax allowable depreciation

Hi,

Company purchased a car from related parties which is one month old. Remaining life is 20 years. Cost is 1,50,000₹ and  purhased at NRV 80000₹ including registration fee.

Tax savings= difference between cost value and acquireed value= 20000₹ in 20 years time.

How can I claim that amount? I'm feeling I'm legally entitled to claim because the bank denied a car loan as my company is five months old. This is an opportunity cost to me which I can't claim as expense and can't charge the customer as my revenues will get impacted. 

Txs 

Replies (1)

Hey Yasaswi! Thanks for the clear explanation.

Here’s a quick breakdown on your depreciation & tax claim query:

  1. Depreciation on Car Purchased from Related Party:
    Since the car is purchased from a related party, depreciation is allowed on the actual cost of acquisition or the net realizable value (NRV), whichever is lower (as per Income Tax rules under Section 32). So here, you can claim depreciation on ₹80K (NRV), not ₹1.5L (cost to related party).

  2. Claiming the Difference of ₹70K (₹1.5L - ₹80K):
    Unfortunately, this ₹70K difference cannot be claimed as depreciation or any other expense because the law restricts depreciation to the lower of cost or NRV for related party transactions to prevent inflated costs.

  3. The “Opportunity Cost” / Tax Savings:
    Opportunity cost like loss of car loan or inability to claim higher depreciation is not an allowable expense under tax laws. It’s a business reality but not a deductible amount.

  4. Tax Planning Tip:
    You can claim depreciation on ₹80K spread over the asset’s useful life (20 years as you said). The saving over time is lower, but fully legitimate.

  5. Bank’s Loan Denial:
    That’s an external financial issue. It doesn’t translate to any tax deduction.

Summary:
You can only claim depreciation on ₹80K (NRV), no separate claim for difference or opportunity cost. Tax laws don’t recognize opportunity costs or denied loans as deductions.

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